Corporate Governance


Corporate Governance Principles

Sumitomo Corporation established the "Sumitomo Corporation Corporate Governance Principles" while keeping in mind that our backbone of corporate ethics is in the "Sumitomo's Business Philosophy" and the "Management Principles." "The Sumitomo Corporation Corporate Governance Principles" was established based on our view that the essence of corporate governance is "improving management efficiency" and "maintaining sound management," as well as "ensuring management transparency" to secure the first two. Following the "Sumitomo Corporation Corporate Governance Principles," we are always seeking to establish the most appropriate managerial system for the Company and are continuously improving our corporate governance to realize management that serves the interests of shareholders and all other stakeholders.

Sumitomo Corporation Corporate Governance Principles(PDF/206KB)

System and features of corporate governance

The Company believes that it is the most appropriate system for the Company by securing the effective supervisory and monitoring function of management oversight by electing independent Outside Directors and Outside Audit & Supervisory Board Members and by establishing the Nomination and Remuneration Advisory Committee, comprised mainly of independent Outside Directors, under an audit & supervisory board member system. The Company has elected multiple independent Outside Directors (as of June 18, 2021, the number of independent Outside Directors is five.) with a wealth of experience and a high degree of specialized knowledge and expertise in different fields. This ensures appropriate decision-making in board meetings and further reinforces the oversight function through further diverse perspectives. Also, the Company has established the Nomination and Remuneration Advisory Committee (chaired by an Outside Director) as an advisory body of the Board of Directors in which the majority of members are Outside Directors. This enhances independence, objectivity and transparency of the Board of Directors’ function with respect to nomination and remuneration of Executive Officers. To strengthen the oversight framework from an external perspective, three of five Audit & Supervisory Board Members are the independent Outside Audit & Supervisory Board Members, one is a legal expert (a former Chief Justice of the Osaka High Court), one is a certified public accountant with considerable knowledge of finance and accounting, and the other is a fulltime Audit & Supervisory Board Member of a listed company and has an experience in business management, thereby ensuring an auditing system that incorporates a diversity of perspectives. Furthermore, in addition to attending the Board of Directors Meeting, Audit & Supervisory Board Members are permitted to attend all internal meetings, enabling them to obtain sufficient information essential for auditing. By implementing the measures above, the Company believes that it has developed an effective, enhanced corporate governance system.
Our Medium-Term Management Plan “SHIFT 2023,” which began in fiscal 2021, also includes further enhancement of our corporate governance in its “Management Base Shift” chapter. For the purpose of strengthening functions of the Board of Directors, the Company will make efforts for further improvements of functions for monitoring by the Board of Directors over the execution of operations through effective supervision of key management policies and strategies (allocation of management resources, strategies related to business portfolio, sustainability management, etc.) and improving organizations for further strengthening objectivity of functions of the Board of Directors.

The Company's Corporate Governance System

Corporate Governance Report(PDF/1428KB)

Framework for "Improving Management Efficiency" and "Maintaining Sound Management"

Directors and the Board of Directors

Composition of the Board of Directors and Election of Outside Director

To facilitate thorough debate and prompt, rational decision-making, the Board of Directors is composed of an appropriate number of members and diversity is ensured in terms of attributes including experience, knowledge, expertise, and gender. In addition, of the eleven Directors elected, five are Outside Directors with a wealth of experience and a high degree of specialized knowledge and expertise in different fields. This ensures appropriate decision-making in board meetings and further reinforces the oversight function through diverse perspectives. All Outside Directors meet the standards related to independence set by the Tokyo Stock Exchange and other exchanges, and the Standards for Independence set by Sumitomo Corporation.

Name Reasons for proposing and summary of expected roles
Nobuyoshi Ehara
since June 2016

< Attendance at Meetings of the Board of Directors in fiscal 2020 >
21 of 21 meetings (100%)
Mr. Ehara has wide-ranging knowledge and a wealth of experience in finance and business management accumulated through his many years working in important positions at a major US financial institution and managing a private equity firm, among other roles. He is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, we proposed him to be elected as an Outside Director. In addition, as Chair of the Nomination and Remuneration Advisory Committee, he is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Koji Ishida
since June 2017

< Attendance at Meetings of the Board of Directors in fiscal 2020 >
21 of 21 meetings (100%)
Mr. Ishida has wide-ranging knowledge and a wealth of experience in finance and business management, accumulated through his many years working in important positions in a major financial institution, and serving as a member of the Policy Board at the Bank of Japan, among other roles. He is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, we proposed him to be elected as an Outside Director. In addition, as Member of the Nomination and Remuneration Advisory Committee, he is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Kimie Iwata
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2020 >
19 of 21 meetings (90.5%)
Ms. Iwata served in several key positions for many years at the Ministry of Labour (currently Ministry of Health, Labour and Welfare), and after retiring from the ministry served in various executive and outside director positions for private companies. Through these and other roles, she has accumulated wide-ranging knowledge and a wealth of experience in business management, corporate governance, corporate social responsibility, and diversity, etc.; she is also honest in character, as well as highly insightful and capable. She will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform her duties properly in that position. For these reasons, we proposed her to be elected as an Outside Director. In addition, as Member of the Nomination and Remuneration Advisory Committee, she is also expected to contribute to further enhancing the independence, objectivity and transparency of the nomination and remuneration process for Director, Audit & Supervisory Board Member and executive management.
Hisashi Yamazaki
since June 2018

< Attendance at Meetings of the Board of Directors in fiscal 2020 >
21 of 21 meetings (100%)
Mr. Yamazaki has highly specialized knowledge and a wealth of experience in law based on his career over many years as a judge and attorney at law. He is also honest in character, as well as highly insightful and capable. He will contribute to the Company’s aims of ensuring appropriate decision making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform his duties properly in that position. For these reasons, we proposed him to be elected as an Outside Director. He is expected to draw on his experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions.
Akiko Ide
since June 2020
< Attendance at Meetings of the Board of Directors in fiscal 2020 >
18 of 18 meetings (100%)
(Since appointed Director on June 19, 2020)
Ms. Ide served in several key positions for many years at a major telecommunications carrier, working as a group company executive and as a full time audit & supervisory board member of the parent (holding) company. Through these and other roles, she has accumulated wide-ranging knowledge and a wealth of experience in information and communications, business management, and corporate governance, etc.; she is also honest in character, as well as highly insightful and capable. She will contribute to the Company’s aims of ensuring appropriate decision-making from diverse perspectives in board meetings and further enhancing supervisory functions, and is thus judged to be qualified for the role of Outside Director of the Company and to be able to perform her duties properly in that position. For these reasons, we proposed her to be elected as an Outside Director. She is expected to draw on her experience and knowledge to fulfill the role of ensuring appropriate decision-making by the Board of Directors and further enhancing management supervisory functions.

Standards for Appointment and Independence of Outside Directors and Outside Audit & Supervisory Board Members(PDF/94KB)

Improvement of Deliberation and Enhancement of Monitoring Function at the Board of Directors

We carefully select agenda items requiring discussion by the Board of Directors so that the Board of Directors can concentrate on the deliberation of important matters regarding the company-wide management such as the business policy and management plan. At the same time, we have increased the matters to be reported to the Board of Directors to make it possible for the Board of Directors to concentrate supervising execution of operation, so that the Board of Directors can enhance its monitoring function. With regard to important topics, moreover, we provide the opportunity for Directors to exchange opinions freely before the resolution.

Each year, the Board of Directors holds an off-site session to discuss which issues should be given higher priority, and the results are reflected in the selection of agenda items for the coming year. In addition, the Board of Directors further enhances its monitoring functions regarding the execution of operation by the management by receiving reports on the status of progress, issues, and responses to those issues concerning division strategies in each Business Unit and by its deliberation focusing on those issues. Moreover, the Board of Directors regularly monitors its status of implementation of the Company’s overall business by receiving activity reports concerning main committees, and portfolio reports on market change risks, country risks, and other intensive risks. Furthermore, the Board of Directors open-mindedly discusses various key management issues including ESG (environment, social, governance) at off-site sessions to enhance the deliberations at the Board meetings.

Separation of Duties between the Chairman of the Board of Directors and the President and Chief Executive Officer, and Limits on Their Terms of Office

In principle, the positions of Chairman of the Board of Directors and the President and Chief Executive Officer are clearly defined and separate in order to ensure mutual supervision, and both positions cannot be held simultaneously by the one person.
The role of the Chairman of the Board of Directors is to supervise the management of the Company; the Chairman has no involvement in day-to-day execution of operations and no authority to represent the Company.

In principle, the Chairman of the Board of Directors and the President and Chief Executive Officer are each limited to term of six years. This limitation on the tenure of top management helps eliminate the possibility of governance problems occurring as a result of the top management not being changed over for a long period of time.

Establishment of the Advisory Body to the Board of Directors

We established the Nomination and Remuneration Advisory Committee (chairperson: Outside Director). Functioning as an advisory body to the Board of Directors, more than half of the Committee members are Outside Directors. The Nomination and Remuneration Advisory Committee is in charge of deliberating on the following matters and will report the outcome of such deliberation to the board of directors:

  1. Policy and procedure for appointment and dismissal of the President and Chief Executive Officer
  2. Policy and procedure for appointment and dismissal of the Chairman of the Board of Directors
  3. Nomination criteria for directors and audit & supervisory board members
  4. Appointment and dismissal of the President and Chief Executive Officer (including nominating successors to the President and Chief Executive Officer)
  5. Nominations of candidates for directors and audit & supervisory board members (including deciding representative directors and executive directors)
  6. Appointment of members of the Management Council
  7. Structure and level of remuneration and bonuses for directors and executive officers, as well as limits for remuneration of audit & supervisory board members
  8. Advisor system

Evaluation of the Board of Directors

To maintain and enhance the effectiveness of the Board of Directors, each year Directors and Audit & Supervisory Board Members engage in analysis and evaluation of the Board’s effectiveness through self-evaluation and other methods. This is followed by the disclosure of overviews of the results. In fiscal 2020, in order to boost initiatives to further enhance the effectiveness of the Board of Directors, we conducted interviews by a third party in addition to conducting a questionnaire survey (anonymous) as in fiscal 2019. The following is an overview of the Board of Directors’ effectiveness evaluation and the results of such evaluation for Fiscal 2020, which was reported to and deliberated at the Board of Directors’ meeting held on May 7, 2021:

  1. Evaluation Methods
    1. Evaluated persons
      All 11 Directors and 5 Audit & Supervisory Board Members
    2. Implementation method
      Questionnaire survey (anonymous) and interviews conducted during the period from November 2020 to December 2020.
      Note: Implemented by a third party (external consultant).
    3. Evaluation items
      (i) Selection of items to be deliberated on by the Board of Directors
      (ii) Deliberations based on changes in the external environment and/or management environment
      (iii) Adequate provision of information in advance to members of the Board of Directors
      (iv) Consensus formation after adequate deliberation
      (v) Demonstration of roles of Outside Directors
      (vi) Demonstration of roles of the Chairperson
      (vii) Demonstration of roles of Directors (other than (v) and (vi))
      (viii) General evaluation, etc.
    4. Evaluation process
      The results of analysis of the questionnaire survey and interview responses as evaluated by a third party (external consultant) were reported to and deliberated at the Board of Directors.
  2. Evaluation Results Overview
    The overall evaluation and analysis by a third party concluded that the Board of Directors has generally been functioning effectively. On the whole, as stated below, a majority of opinions were positive.

    •As a result of defining agenda items (agenda setting) based on the effectiveness evaluation from Fiscal 2019, adequate time was reserved for themes that require higher priority in deliberation.
    •In regular reporting to the Board of Directors by business units, as a result of continuous improvements made thus far, deliberations centered not only on the financial performance of the units but on strategies, challenges and policies to address them, and points have been narrowed down.
    •The Board of Directors were able to enter into deliberations immediately due to prior briefings for Outside Directors and Audit & Supervisory Board Members on the Board meeting’s agenda items. The focus of deliberations has been narrowed down, and this leads to a more constructive discussion and effective proceedings. Also, at offsite meetings which are set up apart from the Board of Directors, free and active discussion on important and diverse management issues took place, supplementing the Board meetings efficiently.
    •The Chairman of the Board of Directors leads the proceedings in a way that encourages attendees to speak while promoting adequate discussion in a fair and neutral manner. The Board meeting is managed to help produce active discussion.

    Efforts have been made in Fiscal 2020 to make deliberations more adequate regarding progress review in mid-term management plan, business strategy and monitoring of addressing challenges in each business unit and human resources strategy, etc. Based on the evaluation results, in Fiscal 2021 as well, it was confirmed to address making deliberations further more adequate regarding important management strategy and policy and progress review in new mid-term management plan (including strategy for allotment of management resources and business portfolio and monitoring of efforts for sustainability management) to further improve the effectiveness of the Board of Directors.

Audit & Supervisory Board Members and the Audit & Supervisory Board

Enhancement of Auditing Capabilities

The Audit & Supervisory Board comprises five members: two Inside Fulltime Audit & Supervisory Board Members and three Outside Audit & Supervisory Board Members. Among the Outside Audit & Supervisory Board Member, one is a legal expert (a former Chief Justice of the Osaka High Court), one is a certified public accountant with considerable knowledge of finance and accounting, and the other is a fulltime Audit & Supervisory Board Member of a listed company and has an experience in business management. All of the Outside Audit & Supervisory Board Members satisfy the criteria on independence set by the Tokyo Stock Exchange, etc. as well as the Standard for Independence established by Sumitomo Corporation.

Ensuring Audit Effectiveness

Each Audit & Supervisory Board Member attends important meetings such as the Board of Directors Meeting, receives reports form Directors and employees, etc. regarding the execution of their duties, asks them for explanations as necessary, inspects important internal authorization documents and examines the status of operations and the financial status regarding the head office and important operating locations. As for subsidiaries, each Audit & Supervisory Board Member promotes communication and exchange of information with directors and audit & supervisory board members, etc. of subsidiaries, and receives reports on the subsidiaries’ business as necessary.

The Audit & Supervisory Board Members' Administration Department (four employees) is established as a specialized organization to support the work of the Audit & Supervisory Board Members. The Audit & Supervisory Board Members participate in personnel evaluations and transfers and so on regarding these employees to ensure their independence from the Board of Directors.

Collaboration between Internal Auditing Department and Accounting Auditors

To ensure audit efficiency, Audit & Supervisory Board Members interact closely with the Internal Auditing Department, receiving reports on internal audit plans and their results in a timely manner. In addition, Audit & Supervisory Board Members exchange information with and monitor the auditing activities of the accounting auditors through regular meetings. By attending audit review meetings and observing inventory audits by the accounting auditors, the Audit & Supervisory Board Members constantly work to improve audit efficiency and quality.

Training and Information Provision for Directors and Audit & Supervisory Board Members

On taking office, Outside Directors and Audit & Supervisory Board Members have the opportunity to receive a briefing on areas including the Sumitomo Corporation Group’s Management Principles, management policy, business activities, finances, organization, medium-term management plan, and risk management system. To enable Directors and Audit & Supervisory Board Members to acquire the necessary knowledge and update it as appropriate, we additionally supply books and other materials and provide access to other resources including seminars and e-learning facilities, offering financial support to cover the necessary costs.

To deepen their understanding of “Sumitomo’s Business Philosophy”, Outside Directors and Audit & Supervisory Board Members, in principle, visit a Sumitomo-related facility during the first fiscal year of their term of office. Outside Directors and Audit & Supervisory Board Members are also given the opportunity to make a group companies observation visit to a facility in Japan and to an overseas. Overseas group companies observation visits were suspended in FY2020 in light of the status of the spread of COVID-19.

Remuneration of Directors and Audit & Supervisory Board Members

Remuneration of Directors (excluding performance-linked bonus) is resolved by the Board of Directors within the limit resolved at the General Meeting of Shareholders. Upon the resolution of the Board of Directors, the details are deliberated by the Nomination and Remuneration Advisory Committee, an advisory body of the Board of Directors a majority of whose members are Outside Directors, and the results thereof are reported to the Board of Directors as part of our efforts to further enhance transparency and objectivity.

As the degree of linkage with business performance is high for the performance-linked bonus, approval for its award and for the upper limit of the award amount decided by the Board of Directors is obtained each year at the General Meeting of Shareholders. The amount of the award is calculated based on a consolidated results-linked formula decided by the Board of Directors. The award of the performance-linked bonus to the individual corporate officers is decided through individual interview with the President, who reports the result to the Nomination and Remuneration Advisory Committee. The remuneration, etc. of Audit & Supervisory Board Members is deliberated by the Nomination and Remuneration Advisory Committee, and the amount of remuneration to be paid to the respective Audit & Supervisory Board Members is determined based on consultation with the Audit & Supervisory Board Members, within the upper limit resolved at the General Meeting of Shareholders.

Overview of Executive Remuneration Plan

Internal Control System

The Company's Board of Directors resolved and implemented the systems set forth in the Companies Act, Article 362 of Paragraph 4, Item 6 (internal control system) to realize the high effectiveness of internal control of the Company. The Company will endeavor to establish a system in line with requests made from time to time based on ongoing reevaluations by reviewing the Company’s internal control implementation status each year.

Internal Control System (as of April 1, 2020)(PDF/154KB)

An overview of the Company’s internal control systems and their implementation status as of March 31, 2021(PDF/195KB)

Internal Audits

The Internal Auditing Department, which reports directly to the President and Chief Executive Officer, is an independent organization that monitors the operations of the Group, and audits organizations and operating companies of the Group. As well as reporting the outcome of internal audits directly to the President and Chief Executive Officer, in principle on a monthly basis, periodic reports are also made to the Board of Directors and the Audit & Supervisory Board. The department conducts audits on all aspects of internal control, comprising asset and risk management, compliance and business operations. Also, by comprehensively examining and identifying the risks inherent in the organization being audited, it provides suitable recommendations based on an evaluation of the effectiveness and adequacy of the internal controls of the organization, thus it expedites improvement and maintenance on auditees’ own initiative. The department will continue contributing to the improvement of internal control at the Sumitomo Corporation Group based on the Group Management Policy.

Committees

Committees including Company Investment Committee, Corporate Strategy Promotion Committee, Global Innovation Promotion Committee, Internal Control Committee, Compliance Committee and Corporate Sustainability Committee are established as advisory bodies for the President and Chief Executive Officer or the Management Council with regard to specific matters that are important from the perspective of Sumitomo Corporation as a whole.

System for Ensuring Management Transparency

Basic Policy on Information Disclosure

To bring an accurate understanding of the Company's management policies and business activities to all our stakeholders, we shall strive to make full disclosure, not limiting ourselves to the disclosure of information required by law but also actively pursuing the voluntary disclosure of information.

Corporate Disclosure Policy

Communicating with Shareholders and Other Investors

Measures relating to the General Meeting of Shareholders

We send out a Notice of Convocation to shareholders approximately three weeks prior to each regularly scheduled General Meeting of Shareholders. We also provide an English-language translation of the notice on our website in advance of sending a Notice of Convocation. We allow shareholders and investors sufficient time to thoroughly examine the propositions to be resolved at the Meeting by enabling them to exercise their voting rights via internet (including through the Electronic Voting Platform for institutional investors operated by Investor Communication Japan, Inc. [ICJ]). In addition, we stream the General Meeting of Shareholders live for shareholders on internet. The streaming video of the meeting is posted on our website for a certain period after the close of the meeting.

Disclosing Various Information

The IR section of our corporate website provides various materials that may be useful in making investment decisions in a timely manner. These materials include financial results, yukashoken houkokusho (Japanese annual securities reports) and other Tokyo Stock Exchange filings as well as streaming and related documents of various meetings. Moreover, we provide our Integrated Report and endeavor to ensure proactive disclosure of not only financial information but non-financial information as well.

Investor Relations and Shareholder Relations

In order to ensure direct communication with shareholders and other investors, we hold quarterly meetings attended by top management to provide information on our financial results for analysts and institutional investors in Japan. Also, we periodically visit the United States, the United Kingdom, and other countries in Europe and Asia to hold one-on-one meetings with investors in each region, and regularly hold company briefings for individual investors in major cities throughout Japan(*).Meanwhile, we ensure constructive dialogue (engagement) between the Company and institutional shareholders who hold the Company’s shares substantially in Japan, Europe and North America through meetings with individuals responsible for exercising voting rights on behalf of such institutional investors, etc. Such dialogue primarily addresses our initiatives and policies relating to environment (E), social (S), and governance (G) issues(*). While increasing management transparency, we aim to strengthen our relationships of trust with shareholders and investors.

(*) These were all held online in Fiscal 2020 due to the spread of COVID-19.

While working to improve and enhance our corporate governance structure and systems, from the perspectives of "improving management efficiency" and "maintaining sound management" by implementing the measures above, we will continue to further strengthen internal auditing, risk management, compliance, to further improve the effectiveness of internal control.

Status of Compliance with the Japan's Corporate Governance Code

As of June 2021 the Company comply all Principles of the Corporate Governance Code (Before revision in the same month). Please refer to Corporate Governance Report for details.

Corporate Governance Report (PDF/1428KB)

Policy on Cross-shareholdings and Standards for Exercising Voting Rights

The Company takes various considerations into account when making decisions about whether to hold shares in other listed companies for purposes other than pure investment. It fully considers a range of issues, such as whether the shareholding will lead to medium-to-long-term growth in profits as a result of maintaining and strengthening the business relationship with the investee company, from the perspective of investment profit, such as a comparison with the capital cost of individual stocks. Based on the above, the Company reviews the significance of its shareholdings and reports the results thereof to the Board of Directors each year. With regard to stocks for which the significance of shareholdings cannot be confirmed, the Company has a policy of reducing the shareholdings of such stocks.

The Company also takes various considerations into account in accordance with the internal guidelines when making decisions about whether to exercise voting rights. Having fully considered a range of issues from both quantitative and qualitative standpoints, it adequately exercises voting rights for each agenda based on whether exercising voting rights will lead to enhanced medium-to-long-term corporate value at the investee company and the Company and to enhanced value for its own shareholders.

When a company that holds the Company’s stock for purposes other than pure investment indicates to sell or dispose of its holdings, the Company respects such a decision in principle and ensures that their business relationship will not be influenced.

In FY2020, under an emergency mode, sale of shares in cross-shareholdings companies was actively implemented companywide as a means of generating cash through a reduction of assets to more strictly manage companywide cash flows.

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